Nikkei Trades Near Records as Bank of Japan Signals More Gradual Rate Hikes

Japanese equities traded near record highs as investors weighed a steady drumbeat of hawkish signals from the Bank of Japan. Deputy Governor Ryozo Himino said the central bank would keep raising interest rates while watching the risk that underlying inflation could exceed its 2% target, noting that wholesale inflation has accelerated as firms pass on higher costs linked to the Middle East conflict. Board member Naoki Tamura has described a baseline path of lifting the policy rate by 0.25 percentage points at intervals of a few months toward an estimated neutral level of around 2%, adding that the bank should accelerate if inflation risks intensify. The BoJ's June summary of opinions showed broad support for continued tightening, with several members arguing that gradual increases now could avoid the need for more aggressive moves later. The bank raised its benchmark rate to 1% in June, its highest since the mid-1990s, and markets are watching its late-July meeting for further guidance. A firmer policy stance has supported the yen at the margin while underpinning financial and exporter shares, even as some officials caution that higher rates could weigh on business investment.